Green Room

Big Carbon

So, how’s that carbon-trading thing going? Big Carbon set up shop in the European Union in 2005, and is scheduled to make its North American-franchise debut in California in January. How goes the trade?

Eurozombie

The answer in Europe is: not well. Carbon trading is a zombie in Europe. It’s going to start eating flesh pretty soon. It’s on a rampage stirring up the airline industry overseas right now (on which more later), but its “life” inside the Union is creepy and inverted.

Since the inauguration of the EU’s Emissions Trading Scheme (ETS), 97 percent of emissions certificates – “permits” to emit carbon dioxide – have been given away to commercial users. The certificates actually being sold were going for over 14 euros each in 2010, but their price has fallen by 60% in the last year. The stock exchange in Bavaria closed its ETS trading operation on 30 June, due in part to its pointlessness.

What this means, just to be clear, is that there isn’t enough demand for any of the things you have to buy carbon permits for to justify buying them. If you can get them for free, great. But if you have to pay for them, you can’t earn enough to make that worthwhile.

Starting in 2013, however, European power generating companies will have to buy all their permits. Consumer rates and prices in general will therefore go up. Germany, with the continent’s biggest economy, is also reportedly planning to cut the number of permit freebies by 56 percent next year, which will force more businesses to pay for their permits.

To be clear, one more time: From 2005 to 2012, the EU economies have not had to absorb the full cost of carbon trading. Three percent out of 100 is not representative of the actual scope of the cost. The EU hasn’t truly implemented ETS, so the record to date is not an indicator of what will happen when ETS is being paid for by everyone. (That said, the estimated cost to the European consumer so far was about 210 billion euros as of mid-2011 – for zero reduction in carbon emissions.)

We have learned what a boon ETS can be for fraudsters. Ingenious criminals have been buying up permits and charging a VAT when they sell them in another country, but pocketing the VAT revenue instead of handing it over the authorities. The fraud has amounted to billions of euros.

Airlines are warning the EU that the airline carbon tax will drive away business and stifle economic growth, but of course, the airlines are just hateful, racist, capitalist fat-cats who only care about killing old ladies and puppies with evil profits. (Interestingly, the ETS giveaways have set up a number of European companies with big stockpiles of carbon credits, which they can theoretically sell someday for a profit, if anyone wants to buy them. As described at the JoNova link in the third paragraph, enterprising Irish power producers have already passed on their future carbon-credit costs to their consumers. They’ve been getting the giveaways that will end in 2013. The Irish parliament, appalled at this, added a profits tax to keep the power producers in their place. Naturally, the option of simply not doing any of this doesn’t occur to anyone.)

The UN’s Clean Development Mechanism (CDM) is tied closely to the EU ETS, getting much of its cash from ETS sales to the disadvantaged carbon emitters: the three percenters who haven’t been getting freebies up to now. The problem with the nascent “global market” in carbon offsets is that it, like the EU market, is vastly oversupplied. The CDM works as follows:

[G]overnments and companies in developed countries can earn emissions offsets (CERs) by investing in low-carbon projects in developing countries. They can use the credits to achieve their Kyoto targets.

We may note that the way CDM works doesn’t reduce the carbon emitted into the atmosphere, it just induces investment money into low-carbon projects in developing countries. Investing in this manner is counted as a reduction in carbon emissions, even though that’s not what it is. This is basically a whole bunch of snake oil.

But interest in it has flagged dramatically anyway. Emissions offsets, called CERs under the CDM scheme, have lost 70% of their value in the last year.

You have to be really, really stinking-drunk rich to play pretend with carbon trading, and fewer and fewer nations (or states) can afford it with each passing month.

California’s big adventure

So what’s the overextended, under-revenued state of California planning to do? That’s right: open its carbon-credit market for business in 2013. Oh, and Quebec is joining in California’s suicidal plunge. Eight US Western states that were originally signed up for the Western Climate Initiative (the state-chartered operator of the carbon-credit exchange) have dropped out, but Quebec – on the other side of the continent – is hanging tough.

Governor Jerry Brown and his carbon bean-counters have already baked $1 billion in projected carbon-credit revenue into his 2012-13 budget proposal. That’s an optimistic projection, to be sure, but a characteristic one. In the Unhatched Chickens Sweepstakes, the state also assumed $1.9 billion in revenue from the Facebook IPO (I’m not kidding) for the same budget proposal. And those two highly risky assumptions still leave California with a $16 billion current deficit on paper.

The case for catastrophic anthropogenic global warming and/or climate change has fallen apart on examination so far. Therefore, the whole carbon-trading scheme is based on a false premise. It is an excellent moral lesson that nothing can go right with a policy that is based on falsifying and misrepresenting data. From criminal fraud to tremendous loss of putative value in the exchange unit, this is what you get when you impose artificial requirements that meet no valid real-world need on the people. Nothing good can ever come of it – and this has been, so far, only a very small dose. Any bigger ones will be much worse.

Blowback

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Comments

At least one industry slated to be hit with new carbon costs is the airline industry – and non-European airlines aren’t taking it lying down. China and India have already made policies that prohibit their airlines from paying the EU-imposed carbon-permit fees. Russia opposes the carbon fee as well, and the US is leading a consortium of nations pressuring the EU not to go ahead with the plan.

If the EU imposes a carbon tax on flights to and from Europe, we’ll see a huge boom in flights to Casablanca, and ferries to Gibraltar. Who knows, maybe Romney was negotiating a deal with Lech Walesa for Poland not to charge carbon fees to American airlines, so they all fly into Warsaw and let people take trains from there elsewhere in Europe.

Oh, and Quebec is joining in California’s suicidal plunge. Eight US Western states that were originally signed up for the Western Climate Initiative (the state-chartered operator of the carbon-credit exchange) have dropped out, but Quebec – on the other side of the continent – is hanging tough.

To be fair, Quebec is one of the few places on earth that could afford a total ban on fossil-fuel power. With lots of hydroelectric dams in the sparsely populated north, and most of the population along the Saint Lawrence River, Quebec is a net exporter of electric power without using fossil fuels.

California has about five times Quebec’s population, and doesn’t get enough rainfall to produce much hydro-power. They really need the water to raise veggies in the Central Valley, but they can’t let those poor little Delta Smelts dry up. A question of priorities, but I digress…

When government pays for research, gets the results it wants, and then charges everyone a Carbon Tax, you just can’t be sure you can trust said research, and the email scandal regarding Global Warming seems to bring out that same conclusion.

Why would a tax fix it?

Cap and trade schemes that put money in a pot that investors like Al Gore run away with, how do they fix it?

There is no reason to pay for energy production in other countries, let us call that charity like it should be if it is really required.

The current administration has wasted so much money on pie in the sky energy schemes, they could have just given the money to the poor to pay their energy bills during this depression instead of wasting it. But they didn’t even do that, they gave it to Green CEO’s. (phoney)Green Construction. And teaching numbskulls to do weather stipping and calling that a Green Job. duh.